The Parliamentary Standing Committee on the Insolvency and Bankruptcy Code (IBC) has proposed that the government make it mandatory for developers to submit details of every customer in a real estate project to that buyer, even if just one buyer files a case against a builder before the NCLT.
As part of its recommendations, Jayant Sinha chaired a panel that called for the inclusion of language in the IBC that would require real estate owners to provide details of other homebuyers of a project to the homebuyer in question so that the required 10 percent or 100 homebuyers can be reached. A minimum of 100 homebuyers or 10% of total purchases, whichever is smaller, are required to start the insolvency procedure, according to a 2018 update to the IBC. The Forum for People's Collective Efforts (FPCE), which pushed for the passage of the real estate law (RERA), explained before the Parliamentary Standing Committee on Finance how this provision is ineffective and disadvantages homebuyers when compared to builders. According to the panel, homebuyers had a difficult time gathering the necessary data to file a claim against builders because the 10 percent threshold was so high.
This is a great development, according to Abhay Upadhyay, President of FPCE and member of RERA's Central Advisory Council, because at the very least, the buyer who has launched insolvency procedures would be provided the names of other buyers who have invested in a project. But, he said, there is still much to be done. The FPCE had brought this issue to the Committee's attention in a letter sent last year. Buyers would have a difficult time getting the contact information of other investors in a project, if 100 investors were required to meet the threshold for IBC proceedings. Typically, it takes a homebuyer at least six months to collect the information of 10 percent of purchasers, or 100 homebuyers in total, before filing a complaint with NCLT. Furthermore, by the time he files the lawsuit, the buyers' coordinates may have changed, and the court may decide to dismiss the case. As a result, the government should consider lowering the 100-buyer threshold to ten and the 10% cap to one percent, which is still feasible. For a period of six months, the coordinates should be deemed valid.
According to legal experts, the Standing Parliamentary Committee on the Insolvency and Bankruptcy Code (IBC) proposal will ensure that there is some form of a class action. As a result of a lack of publicly available information about allotments, it is extremely difficult to gather all customers together. At the very least, a class action would be possible. Even the publishing method is not always sufficient to alert all customers to pending litigation. A Legal Expert noted that the panel's proposal is a welcome move in protecting customers' interests, especially because the bulk of consumer complaints stem from inaccurate or insufficient information supplied by real estate developers.